WHAT IS THE VALUE OF SOLAR POWER?
Environmental groups contend We Energies rates discriminate against businesses that install panels
“This is a pretty simple case about fairness.” Brad Klein Lawyer for the Environmental Law & Policy Center
On a sunny day, any excess power generated by a large business or retailer that has installed solar panels must be given to We Energies for free.
The only alternative is to sell all of the power generated by the solar panels to We Energies — and then buy power from the utility at a higher rate to keep the lights on.
A coalition of environmental groups contends that the first option discourages businesses from adopting solar power. And it says the second option creates an incentive to install smaller systems than the businesses would otherwise.
The coalition has appealed the Public Service Commission’s decision in December that approved the tariffs, or rates, that We Energies pays — or, in the case of one group of customers, doesn’t pay — for solar power generated by its customers.
The appeal, filed in Dane County Circuit Court, contends that the rates place a significantly lower value on solar power sold to the utility by its customers than on electricity generated by the utility’s own power plants and solar projects.
“This is a pretty simple case about fairness,” said Brad Klein, a lawyer for the Environmental Law & Policy Center.
The petition asks the court to compel the PSC and We Energies to pay a fair and legal price for power sold to the utility by customers who have installed solar panels on their rooftops or property. It was filed by the Sierra Club — John Muir Chapter, Renew Wisconsin, the Energy Law & Policy Center and Vote Solar.
The rates were approved by the PSC by a 2-1 vote. Rebecca Cameron Valcq, who was appointed by Democrat Gov. Tony Evers, dissented.
We Energies contends that the rates are fair because the amount of solar power available from its customers is unpredictable. In contrast, the electricity that We Energies’ power plants, as well as its wind and solar projects, generate is dedicated to meeting its customers’ needs.
(The utility doesn’t make money on the excess solar power generated by its customers. The power reduces the utility’s fuel costs, and those costs are passed directly through to customers without a markup.)
The environmental group’s petition is the second filed in the past year involving PSC rulings on solar power owned by customers. Eagle Point Solar sued the PSC and We Energies in May challenging a commission ruling that bars solar developers from owning projects that provide electricity to one customer.
The cost of solar power now is a fraction of its cost 10 years ago — the price tag for large-scale projects has fallen by roughly 80% — and the outcome of both petitions could affect how quickly solar power is developed in the state.
The ability to install rooftop solar panels enables residential and business customers to help lessen carbon emissions and address climate change, said Klein, the lawyer for the Environmental Law & Policy Center. But the issue should matter to anyone who cares about markets and competition.
“We just don’t think the company should be allowed to stack the deck,” Klein said.
Federal and state law prohibits utilities from discriminating against renewable energy generated by customers. The question is how to value the power sold to utilities, particularly by those customers who want to install large systems.
Almost all of We Energies customers who can generate their own power come under two options.
One is for small residential and commercial customers who can generate up to 300 kilowatts of electricity; the other is for larger customers who can generate up to two megawatts of electricity.
Residential and small commercial customers receive 4.245 cents on average for every kilowatt hour — 1,000 watts generated for one hour — that they generate in a given month in excess of what they use. (Some residential customers receive a higher rate that was in effect when they installed their solar panels.)
The rates basically offset the fuel costs that We Energies would incur if it generated the electricity itself.
Residential and small commercial customers received a credit for excess electricity generated during the day that offsets the electricity that they use at night or on a cloudy day. That credit — what is known as net metering — means they essentially receive retail rates for the power they don’t use on sunny afternoons.
Three hundred kilowatt hours is enough power for about 60 houses, according to We Energies, and this is the tariff that applies to most customers with solar power.
The economics are less attractive, however, for customers with solar power systems that can generate between 300 kilowatts and two megawatts of electricity.
This group of customers include socalled big-box retailers, such as Target, that have been among those at the forefront of installing rooftop solar. The Ikea store in Oak Creek, for instance, can generate 1.6 megawatts of electricity.
These are the customers who must give any excess power that they generate to We Energies for free.
The result is that if a customer installs enough solar panels to meet it peak load during a hot summer afternoon, when its air conditioners are running full blast, the customer receives nothing for the excess power generated during most of the year.
We Energies said it has about 30 customers who fall into this group.
The other option — selling all of the power to We Energies and then buying power from the utility at a higher rate — apparently is less appealing.
We Energies has only two customers in this group. They receive roughly 4.245 cents a kilowatt hour on average, though the rate varies based on the time of day and season.
The coalition of environmental groups contends that the value placed on power from customers who generate solar power should be more in line with the value placed on power from We Energies’ own solar projects.
“It’s only fair that customers receive the value that the utility recognizes for itself,” Klein said.
All of the customers — including residential and small commercial customers — receive no value for the so-called generating capacity of their solar power systems.
Minnesota takes that into account in setting the rates for solar power sold to utilities in the state, Klein said.
Putting a value on that generating capacity, though, gets complicated.
When a customer installs solar panels on a rooftop, it reduces We Energies’ need to spend money on new generating capacity. But We Energies adds generating capacity to meet the peak demand for power — typically late morning to mid-afternoon on a hot summer day.
How much excess solar power is available to meet that peak determines the value of its generating capacity, and most customers would have little excess power on those hot summer afternoons.
Robert “Bert” Garvin, executive vice president of regulatory affairs for We Energies, said that taking the generating capacity into account would increase what other customers pay for power.
We Energies’ own solar projects also are dedicated to generating power for all its customers, he said, and the utility can take steps to ensure their reliability.
Will Kenworthy, regulatory director for the Midwest for Vote Solar, challenges that, noting that a kilowatt generated by solar panels owned by a customer is no different from a kilowatt generated by We Energies.
(Vote Solar, which works to promote solar energy, is not a trade group and does not have corporate members.)
Without question, rooftop solar is certain to become more common in coming years given the sharp drop in the cost of solar power — and every solar panel installed means less revenue for We Energies.
Tyler Huebner, executive director of Renew Wisconsin, said the groups want to ensure the rates that We Energies pays for solar power provide a level playing field for those customers.
The coalition wants the PSC to do an independent study, similar to one done in Minnesota, to determine a fair value for solar power sold to utilities by customers.
The issue, Klein said, was dodged in We Energies’ recent rate case.
“The commission really didn’t do its job to protect customers and support fairness,” he said.